An Interview with the Legendary Mark Suster about Investing, Israel, and the Internet of Things

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Ok, listen, I have done my fair share of legendary interviews. From Om to Woz to Alyssa to Vic to Andreessen, and many many more! Twitter has been monumental in helping me form amazing relationships across the globe and I have zero intention of slowing down. Zuck and Marissa, I am looking at you. I will let you choose who goes first.

Anyway, some amazing interviews over the years but this one, this one has a special place in my heart. Honestly, I have been following Mark on Twitter for as long as I can remember and just quietly learning from the man daily for years.

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There are some people who I look to for insights on tech. There are others I look to for their opinions on life. Those two do not usually mix. Over the years, I have found Mark to be one of the most balanced individuals in the tech world and no, I do not always agree with him, but I always learn from him.

He is also someone I have a tremendous amount of personal respect for because of his opinions on one specific issue. See question 2 for more on that.

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Anyway, when Mark agreed to this interview despite his celebrity status in the tech world, I was thrilled. He then outdid himself by providing such in depth comprehensive and insightful answers. Enough babbling on, enjoy the interview.

Thanks again, Mark!

1: Who is Mark Suster?

I run the largest venture capital fund in Los Angeles, which is called Upfront Ventures, which has more than $1.2 billion under management across 5 funds, the most recent of which was $280 million. We started investing this fifth fund in March 2015. Prior to being a VC I was a 2x founder of two software companies – both in the document management and team collaboration spaces. The first I built-in Europe and we operated in 6 countries before selling to a French, publicly-traded company. The second I built-in Silicon Valley and was sold to Salesforce.com (their 3rd acquisition ever) and I became VP, Products at SFDC.

I grew up in Northern California and started programming computers as a teenager, which in the early 1980’s was more the exception than the rule. I also grew up for many years with a family of Israeli’s living in my home. My mom was the president of the local UJA chapter and took in young Israelis, which was a life experience for me as a teenager to have somebody from a different culture, language and background living with us. It also gave me a much better appreciation for the Israeli culture overall – and I learned to argue much more proficiently 🙂

I studied economics at the University of California at San Diego (UCSD), where I am now on the alumni board and received my masters in business from the University of Chicago.

2: You are one of Israel’s biggest supporters in what I call the elite of the tech world, at least in my Twitter feed. What has the experience been when so many big names are so blatantly anti Israel? Has it had an effect of any kind?

Well, let me start by why I spoke out against the loud anti-Israel cries that were coming from Silicon Valley during the 2014 conflict in Gaza.

I would start by saying that I believe every individual has the right to voice an opinion on world politics and have a different opinion than my own so it wouldn’t trouble me, per se, if somebody had a different point of view on Israeli policies and politics than I. In fact, many Israelis and I don’t totally agree in Israeli policies! That’s what I love about the Jewish culture – we accept and tolerate debate and dissent and are willing to engage publicly and democratically.

What concerned me though was a growing number of influential tech professionals who were publicly condemning Israel’s actions in Gaza without ever having commented publicly on any other world conflict at any time and of any level. And it felt particularly hypocritical during an era where contemporaneously we have Vladamir Putin’s imperialism in Crimea and the Ukraine more broadly leading the many deaths and much destruction. The criticisms came in an era of unprecedented state-sponsored death and destruction in Syria, political crackdowns in Egypt, death squads emerging in Iraq, terror in Nigeria under Boko Haram. With all of the worlds conflicts going on and with all of life’s injustices I felt it was very convenient for people to only single out Israel’s policies for criticism.

And even if one criticized only Israel and once publicly it wouldn’t be enough for me to speak out. But the chorus of constant Tweets from some of our communities leaders made it clear that sub-conscious antisemitism was involved. It’s sad to me that in this era where we see such a clear demonstration of over antisemitism in sub-populations in Europe that even pointing out sub-conscious bias in my country would immediately illicit counter-claims of “playing the Jewish card.” It is the sub-conscious bias we need to fight harder against. The tech industry is filled with millions of young, impressionable professionals that are starting to build their world compass views and when people they admire speak out in one direction and these claims go unchallenged a new generation of biases can emerge.

On the positive side I should tell you that I received an unbelievable amount of support privately from my many Jewish friends who are entrepreneurs and venture capitalists. Many told me that if things got worse they would gladly band together to speak up for the cause of Israel and of Judaism more broadly. Like many Israelis, many of these people aren’t deeply religious but like me feel a strong culture bond forged through thousands of years of mutually shared life experiences, parenting and culture. The fact that most of these people didn’t feel they could speak publicly should tell you something about how people fear reprisal in our sector in America.

3: Speaking of Israel, how do you explain the level and quantity of innovation coming from this tiny country?

Well, so much has been written about this topic by so many people more studied and more qualified to speak on the topic of the “Israeli miracle” than I am so please take my comments as just a layperson’s perspective.

My instinct is that part of Israel’s success comes from the very nature of our Jewish culture and history. Our ancestors were forced out of normal society’s trade groups and guilds so as a people we developed different coping skills that historically gave us advantages in the modern world. Our people became traders, financiers, scientists, artists, politicians and innovators more broadly. This is our shared cultural journey that has turned up globally across the diaspora so it was only logical that it would happen in spades in Israel itself.

Second, our culture encourages debate, which is the cornerstone of progress as it means good ideas get furthered and bad ones get buried. We have thousands of years of valuing education and encouraging study.

Third, our culture encourages gender equality and promotes strong women in a way that some societies never adapted to. I know this isn’t true for 100% of the Jewish population but for the population at large the role of women in the family, in our civic lives and in society more broadly has been more evolved than many other cultures and societies. This gives Israel double the output of creativity and achievement as compared to societies that are not as egalitarian.

Finally, I would rely on the age-old saying that “necessity of the mother of all invention.” When you live in a region dominated by interests that are hostile to your long-term existence you innovate or perish.

If you want to look for comparables to Israel to look for some patterns I would point you to South Korea. It is the perfect example of a small place (relative to neighbors) with a long history of people being hostile to their interests, where the country places high value on education and where women are national leaders and thinkers. Unsurprisingly South Korea is also a world innovator in technology and has produced the only real rival to Apple (Samsung) that I can see in today’s market.

4: What are your thoughts on IOT and the whole hardware revolution?

I have long been a believer in the Internet of Things (long before it was called that) and I believe we have only scratched the surface of our societal transformation as a result. For too many people IOT has become synonymous with “wearables” and other health & fitness devices and I believe this is a very narrow view of the world. Many people are also obsessed with the consumer adoption of IOT when of course B2B and industrial IOT will be much larger.

Put simply, there are 7 billion people on the planet and 24 hours / day so the amount of computing we can do as humans, while immense and transformative, pales in comparison to machine-to-machine communication and computing opportunities and thus the IOT has much broader applicability than the media would report but it’s easier to write about health tracking.

5: What phone do you use and why?

iPhone. I keep trying to switch to Android (because I feel it’s a more open platform) but I have to admit that I get pulled back into the iOS ecosystem due to the quality of their hardware, the seamlessness of their OS across multiple devices I own including computers and tablets. And maybe I’m just getting too old to change 🙂

6: What spaces are you most excited by in terms of investments?

There is no way for me to answer this question without sounding like I’m reducing my thoughts to cliches. But the absolute truth is that I’m founder driven. I can be excited by any market where I perceive is large enough for a commercial and financial success and where I find a founder who is passion-driven and knowledgeable.

I have recently invested in Meredith Perry who wants to change the world of wireless charging at uBeam through ultrasonic sound waves, Pramod Sharma who wants to change how children interact with technology using computer vision and tablets and Sam Rosen who is simply trying to build the best physical storage solution at MakeSpace.

7: What’s your take on startups and monetization? Should startups, specifically mobile startups have a monetization strategy from the get-go or traction first, money second?

I have written widely on this topic at BothSidesofTheTable.com.

It is a rare company that shouldn’t concern itself with immediate monetization – I call this the 0.1% elite. These are people who have the right academic background and pedigree plus the connections to VCs to be able to raise large amounts of capital at reasonable valuations to delay monetization.

These are rare circumstances and while in early 2015 it has become more common place I don’t think you can plan for this to be the norm through the 2015-2020 timeframe. For most people monetization gives you more options, reduces your dependency on financiers and proves to you whether you have customers that value your offering.

If you do find yourself inside the “lightning in a teacup” type company (like Meerkat is today) then you would benefit from the strategy of delaying monetization while you build our your product and audience because you can attract unlimited capital and delay making money. For most companies this is a bad strategy.

8: What are your thoughts on crowdfunding both Kickstarter style and equity crowdfunding? A passing fad or an important trend of democratization of investments?

Kickstarter, Indiegogo and crowd-funding of product releases is a very important and sustainable trend. We have seen companies that have been able to secure demand for their products and have a sense for inventory requirements before having to place final orders. This can be critical in the early stages of a business both in terms of getting a few more cycles of product innovation completed as well as managing cashflow and reducing VC dilution. The danger is when companies launch too early in their development cycle and run the risk of disappointing the community. I suggest product crowdfunding once you’re about 4 months out from being able to ship product.

I think crowdfunding of capital is also an important change and gives entrepreneurs access to new sources of capital. I do feel more cautious about this market, though, and it has nothing to do with the fact that I’m a VC. I worry for investors who are piling money into startups with very limited financial information, oversight or controls. These investors seldom know what the terms of the investments that the firm has taken on (example – the rights of the preferred stockholders) and have very limited company financials and reporting. I also worry that many of these investors are less sophisticated and have mostly benefitted (at least on paper) from the fact that the tech industry has only gone up from 2009-2015. Let’s review how these investors fare after the next downturn. I would also state that for companies if you can raise money from capital sources that are deeply committed and well-financed to help you last through a downturn you also would be in a more secure position. When (not if) the next downturn comes we’ll see how committed many of the angels who fund through crowd-sourced platforms really are.

9 Do you use any wearables? Which? Why or why not? Predictions for the Apple watch?

I’ve tried them all like most great technologist do: FitBit, Nike Fuel Band, Samsung Watch, etc. But in the end like many consumers I’ve abandoned these initial products because they haven’t made a substantive improvement or lasting impression on my life.

Apple Watch might be the first one to buck this trend but I’ll wait to see. I’ve spoken with Apple employees who have told me the experience of the Apple Watch is transformative. They have told me that in an era where the mobile phone has become too pervasive and too intrusive in our personal lives, the watch creates a more seamless experience that allows you to be present in meetings or personal events without having to take out your mobile phone. I can’t say for myself whether this is just another technology creep into my personal life and space or whether it will enhance it. But early reports from my friends on the inside has been strong.

10: Three tips for someone who wants to pitch Mark Suster or any top-tier investor/VC?

– Find a way to get introduced by a trusted source. It’s part of how we judge your entrepreneurial skills
– Be politely persistent. On the persistence topic Israeli’s have a competitive advantage. But be mindful of what is considered “polite” in different cultures varies. As somebody who grew up with Chutzpah I am on the tolerant end of the spectrum but each individual and culture is different. Just be aware of this
– Start your process early. Build relationships with VCs more than pitching them. When it comes time to “pitch” it’s nice if they already know and like you
– Have a great product, great team and compelling market! And work on your “narrative” because the story you use to convey your idea matters greatly


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hilzfuld

Hillel is Co Founder and Chief Marketing Officer at ZCast, a company taking on the pain of modern audio broadcasting. Hillel also blogs for many influential sites including TechCrunch, Mashable, The Next Web, Business Insider, The Huffington Post, Venturebeat, and others. Additionally, Hillel mentors startups across Israel in different accelerators including The Google Launchpad, the Microsoft Ventures accelerator, Techstars, The Junction, and more. Hillel has been named Israel's top marketer, has been featured on CNBC, Forbes, and many others and was recently added by Google to its marketing experts program. You can find and talk to Hillel on Twitter. He is @Hilzfuld.